McClellan OB/OS Oscillators Oversold With 21-day Lowest Since March 2020
All the major equity indexes closed lower Tuesday with negative internals on the NYSE and NASDAQ as trading volumes rose and selling pressure continued.
While the charts saw two indexes close below support, we note the large-cap indexes closed around the midpoints of the session versus the lows. While the one day’s action in that regard is not significant, it may imply a lessening of selling pressure. Nonetheless, the chart trends remain a mix of bullish, neutral and bearish near-term projections.
On the other hand, the data has become a bit more encouraging as insiders upped their buying activity, though remaining neutral, while the ETF traders continued to sell.
As well, the McClellan 1-day OB/OS Oscillators are back in oversold condition while their 21-day averages are the most oversold since March of 2020. In our opinion, given the OB/OS and psychology, they suggest the macro-market condition is likely a better buy than a sell currently. While confirmation has yet to appear on the charts, we believe a “neutral/positive” near-term macro-outlook for equities will be seen as appropriate in retrospect.
On the charts, all the major equity indexes closed lower yesterday with negative internals on the NYSE and NASDAQ as trading volumes rose on both. The large-cap indexes closed near their midpoints with the rest near their lows.
- The SPX closed below its near-term uptrend line and is now neutral while the COMPQX and NDX closed below support with the COMPQX trend turning negative.
- So, the DJI is in a near-term positive trend with the COMPQX, MID, and RTY negative and the rest neutral.
- Breadth weakened with the All Exchange, NYSE and NASDAQ cumulative advance/decline lines now negative. While we view them as lagging indicators, they need improvement.
- No stochastic signals were generated.
Looking at the data, the McClellan 1-Day OB/OS Oscillators are all oversold (All Exchange: -70.37 NYSE: -63.66 NASDAQ: -74.82).
- Of note, their 21-day levels are the most oversold since March 2020.
- The % of SPX issues trading above their 50 DMAs dipped to 51% and remains neutral.
- The Open Insider Buy/Sell Ratio lifted to 51.7 as insiders did some buying, yet also remains in neutral territory.
- The detrended Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders dropped to 0.76 and stayed neutral.
- This week’s contrarian AAII Bear/Bull Ratio rose to 1.2 as the crowd became more nervous and now has bullish implications. Bears now outnumber bulls.
- The Investors Intelligence Bear/Bull Ratio (25.3/39.8) (contrary indicator) is still neutral, but the number of bullish advisers dropped a notable 10 points.
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg rising to $215.96 for the SPX. As such, the SPX forward multiple is 215 with the “rule of 20” still finding fair value at approximately 18.6. The SPX forward earnings yield is 4.66%.
- The 10-year Treasury yield rose to 1.44%. We view support at 1.35% and resistance at 1.53%.
In conclusion, for the reasons noted above, we remain near-term “neutral/positive” in our near-term outlook.
SPX: 4,633/NA DJI: 35,319/36,159 COMPQX: 15,088/15,516 NDX: 15,713/16,069
DJT: 15,480/16,540 MID: 2,730/2,776 RTY: 2,155/2,220 VALUA: 9,522/9,716